BAE beefs up cyber security business with €217m purchase of Norkom

BAE Systems has dipped 1.4p to 341.2p as it made another acquisition in the cyber crime arena, but analysts welcomed the deal.

The company is paying €217m for Irish and London listed Norkom, which specialises in systems designed to counter financial crime. BAE's chief executive Ian King said:

Countering financial crime is a priority for governments and financial institutions. [This deal] will present an opportunity for accelerated growth in the fast growing cyber and intelligence services sector.

Norkom, which said in November in was in talks with a number of companies, employs more than 350 people and will fit in with BAE's existing Detica business. Analyst Guy Brown at Evolution Securities said:

This bid highlights convergence between security and defence and particularly the focus on cyber security. As governments prioritise local security threats over global reaching firepower, on reduced budgets, we can expect defence companies to do the same.

We retain our positive view for BAE based on its low valuation and high dividend yield. We believe that with the defence sector the primes are best positioned with robust contracts and opportunities for outsourcing. Opportunities in emerging markets further enhance our positive view.

And in a buy note Andrew Gollan at Investec said:

[The acquisition] looks expensive at around 4.4 times 2010 sales, but highly complementary to BAE's Detica NetReveal product and follows a series of acquisitions by BAE in the high growth IT solutions and security sector, taking group revenues in this space to around $2bn - a serious player.

[BAE] stock remains good value. This week's revelation that the $1.5bn disposal of Platform Solutions is off the cards was a minor negative. However, this was eclipsed by the news that the proposed US budget cuts by US Defence Secretary Gates were less than anticipated. After a difficult 18 months or so, we believe BAE is in good shape having negotiated a number of headwinds.